I am a great grandniece of Thomas Edison and an innovation process expert. My Forbes.com blog aims to capture the rich traditions of American innovation and translate them for today’s digital era. I am CEO of my own firm, The Power Patterns of Innovation, and served for 15 years as a Global 100 executive leading innovation teams worldwide. I bring a business eye to Edison’s world-changing innovation methods, helping executives build new capability for their teams and organizations. My books are widely used in college and graduate courses across the US, and offer a hands-on guide for every business: Midnight Lunch (Wiley 2013) and Innovate Like Edison (Penguin 2007).

Since the mid-1980s, almost everyone who has worked with a computer has used a Microsoft product. Innovations like Windows, Word, Excel and PowerPoint helped drive core business activity at millions of companies, and cemented Microsoft as one of the founding members of the digital age. Microsoft helped usher-out carbon paper, typewriters, adding machines, overhead projectors and secretarial pools while changing how we write, crunch numbers and make presentations.

Though Microsoft’s place in history is certain, how the company innovates under new CEO Satya Nadella will define its future. And while Nadella announced last week that Microsoft will be adding new Surface lines to its tablet business, consumer expectations for an innovation breakthrough from the company appear low. What can Nadella do to reposition the company at the leading edge of computing – a coveted spot now held by competitors like Apple and Google? Will Microsoft languish and become the next IBM, a legendary but now secondary player? Over the next few years, Nadella’s ability to leverage collaboration as a driver of innovation will determine the future of Microsoft. And he’ll have to work fast.

And Nadella’s challenges at Microsoft are not just technical – they are cultural. Under Bill Gates and Steve Ballmer, Microsoft developed a warrior culture that rewarded aggressive and fierce employees, successfully staving off competitors to its dominant PC operating system. But this ‘eat what you kill’ culture hasn’t succeeded in recent years. Former CEO Ballmer famously failed to anticipate the popularity of smartphones and fumbled the ball in the search engine market with Bing, which has gained ground recently but lacks the buzz and momentum of Google. Ballmer’s venture into tablet computing via Windows 8 and Surface didn’t excite new customers enough to close the company’s market share gap with Apple.

Can Microsoft’s Warriors Collaborate?

While innovations from Xbox, Kinect, Office 365, and Microsoft’s cloud business offer hope that the company’s innovation DNA is not totally gone, the next great Microsoft creation seems far off. How can Nadella change the game?

I’ve tapped my own research on collaboration in analyzing Nadella’s comments. I see Microsoft’s new CEO touching upon each of four key phases that drive collaboration success: Capacity, Context, Coherence and Complexity. This gives him a solid springboard to make innovation happen in a new way at the company.

Capacity – Nadella uses questions as a backbone for the letter, artfully weaving them throughout his commentary. Nadella asks, “Why are we here?” and “What do we do next?” and (implicitly) “How can we build on our foundation, together?” Each query is crucial to opening new conversations within Microsoft. Questions help teams begin on a neutral playing field, quelling the warrior instinct to create a win/lose environment right from the start. The willingness to pose objective, probing questions lies at the core of every company’s ability to create collaboration Capacity.

Context – In the letter, Nadella notes that Microsoft is “the only company with history and continued focus in building platforms and ecosystems that create broad opportunity.” Here he is laying out Context. He comments, “this is a software-powered world. It will better connect us to our friends and families and help us see, express, and share our world in ways never before possible.” These words reveal that Nadella views software as the defining context of the organization. Specifically, he positions software platforms as the bedrock of Microsoft. Building on this Context will allow Nadella a fighting chance to match bench strength in battling Google and Amazon.

Coherence – Nadella also states that he believes “over the next decade computing will become even more ubiquitous, and intelligence will become ambient.” This offers a vision for where Nadella believes the entire computing industry is heading. No leader can power collaboration or innovation success without first establishing a vision of the future. This is where Yahoo CEO Marissa Mayer has stumbled badly in her corporate resuscitation efforts. Nadella realizes that computing will be everywhere. It will surround us, offering forms of intelligence that we cannot currently grasp. By voicing this vision, Nadella outlines a path that Microsoft can blaze collectively, embracing the third crucial component of collaboration: Coherence.

Complexity – Microsoft faces complexity everywhere it competes – markets, technology, business models, and more. While the company today doesn’t directly face off with hardware giants like Cisco, if software platforms become the future, Microsoft will have to put up its dukes with Cisco for kingship of the IoE – the Internet of Everything. When Nadella writes in his letter about “an ever-growing network of connected devices” and ” incredible computing capacity from the cloud, insights from big data, and intelligence from machine learning,” he gives a nod to Complexity.

Nadella must quickly determine how – and where – Microsoft wants to innovate. He clearly recognizes a need for cultural change. Unlike predecessor Steve Ballmer, Nadella communicates his views about the future in a manner that is not warrior-like or heavy-handed. In fact, Nadella stikes a very Edisonian tone when he states “if you are not learning new things, you stop doing great and useful things.” It’s doubtful those words could ever have flowed from Ballmer’s lips.

Moving forward, Nadella has got to flex his muscles and convince Microsoft’s warriors to embrace the four C’s of collaboration. Unlike Bill Gates, Microsoft’s founder who famously spent reclusive weeks dreaming up new products and applications, Nadella must recognize he’s not in Kansas anymore. Unless he moves now to develop internal knowledge networks that capitalize on the company’s collective brainpower, the future of innovation at Microsoft will dim.

Sarah Miller Caldicott is a great grandniece of Thomas Edison and an innovation process expert. Connect with Sarah on Twitter and LinkedIn.

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Sarah, Nadella certainly has his work cut out for him. Changing a culture can be perilous work. What can he do to get outside catalysts to help? Is that a valid angle or is this about creating the needed change on his own?

Sander…I think one key to Nadella’s success will be his ability to spot catalysts inside the organization. He’s got to ‘grow his own’ innovation agents if he’s going to be successful – dozens of them. Because Microsoft also has to navigate product development waters with Nokia, this insider game is crucial. That said, I expect Nadella will need to make a handful of new hires from the outside. But he’ll have to tap individuals who are already respected in the industry. They don’t have to be famous, but they’ll need to be big thinkers who can garner respect while also implementing change. True catalysts! Thanks for your comment!

Pankaj…Nadella has strong knowledge of cloud technologies given his past involvement in that area of Microsoft. This puts him in a solid position to envision “what’s next?” for Microsoft. But, Nadella is going to have to work hard in designing new innovation teams that break the mold vs. past efforts, and shift the Microsoft culture into a new gear.

You summarize where Microsoft is, certainly post-Ballmer, it has to soften its image, and start listening to what the market wants and how they want it delivered, not “our way” which is part of this competitive streak within Microsoft. The real challenge is internal, they have enormous IP and knowledge but uit is weaving it into different combinations and the silo mentality will not win that race. If Nadella can achieve the bringing together of strong personalities into collaborative ones, he will have a chance but the Ballmer shadow looms in many of the existing appointments. Figuring out cloud within the total value proposition within our corporations is somewhere Microsoft are well positioned to exploit.

Nadella has a tough path to travel to pull Microsoft up by the boot straps and put its incredible IP to effective work. He seems to begin doing that but the early promise needs some more concrete changes to ‘cement’ the new direction. I hope Microsoft succeed but oh boy have they driven me (and countless others) totally nuts in their constant releases, crashes and many more things. The attraction of Google and its cloud for all things everyday is powerful and unless Microsoft can redraw this competitive map it will shrink and specialize in given areas.

Paul…Thanks for weighing in! I agree that Microsoft’s body of IP is formidable. They’re sitting on horsepower that the company hasn’t fully harnessed yet. While the shadow of Ballmer and Gates loom large, I believe an even more challenging issue is the lukewarm performance of Nokia. Indeed there are strong personalities at Microsoft; but they have the strength to pull the sled. I’m not convinced Nokia is a strong partner. If I were shopping for collaboration know-how, Nokia would not make my short-list.

At this point, Microsoft is known among knowledgeable techies for 4 things: a long, despicable history of underhanded, competition-destroying behavior, more recent behavior of very shady patent trolling, a fading collection of legacy software and hardware, and no real place in any discussion of future tech.

Microsoft does indeed have a lot of negative baggage in IT and software communities. Of all the challenges Nadella faces, these may prove the most daunting. The fact that the Microsoft name no longer surfaces when peers talk about innovation-driven companies like Apple, Google, Facebook and Amazon is telling. Thanks for weighing in with your comment!